Office space demand makes a comeback in Kolkata

Although transaction sizes have not taken a significant leap, the increase in number of transactions have pushed demand and growth especially in peripheral locations like Rajarhat, Salt Lake Sector V, Topsia and EM BypassTasmayee Laha Roy | ET Bureau | March 30, 2017, 18:30 IST

KOLKATA: With approximately only 2 lakh sq ft of vacant office space available in the central business district, Kolkata is finally marching toward a demand-driven market when it comes to office space transactions.

Although transaction sizes have not taken a significant leap, the increase in number of transactions have pushed demand and growth especially in peripheral locations like Rajarhat, Salt Lake Sector V, Topsia and EM Bypass.

“While infrastructural development is getting satiated at other metros, Kolkata with a stable government and a new approach to attract investment is preparing to accommodate more players. Though cities like Mumbai, Bangalore, Pune and NCR still claim the lion's share office space demand, Kolkata is picking up pace. There was a supply of 4.7 million sq ft in 2016 and that might increase in the upcoming fiscal," said Rajat Gupta, MD, advisory and transaction Services, CBRE South Asia Pvt. Ltd.

“Kolkata is an unexploited market. Several corporates are debuting with the east and local players are considering expansions as the availability of quality space has remained stable through the past two years," Gupta added.

The main city hardly saw any new launches during 2016-17 according to experts, helping boost demand.

“The city's fringes are growing and has about 20 lakh sq ft of vacant office space. While transaction sizes vary between 2,000 sq ft and 60,000 sq ft, the number of transactions went up by at least 25% in the last quarter of 2016-17 against the same period last year,“ said Rahul Baid, head of corporate transactions at city-based consultancy firm Champalall & Co.

“With increased queries and decreasing vacancy levels, we can foresee a price rise in the upcoming fiscal. Peripheral Kolkata will see a surge in pricing given the addition of new infrastructural developments like the Maa, Patuli and Ultadanga flyovers that lead to better connectivity in the peripheral areas,“ added Baid.

Transaction activity was mainly led by occupiers belonging to the engineering and manufacturing, telecommunication and pharmaceuticals sectors.

“Rental values, however, remained stable during the review period. Leasing activity in the secondary micromarkets of EM Bypass, Kasba, Gariahat, Topsia and Sarat Bose Road marginally rose during the current quarter,“ added Gupta.

While rental values at the CBD remained stable at Rs 90 per sq ft, rates at the city's fringes remained consistent between Rs 38-40 sq ft.